{"id":39656,"date":"2018-10-24T17:50:45","date_gmt":"2018-10-24T22:50:45","guid":{"rendered":"http:\/\/olduvai.ca\/?p=39656"},"modified":"2018-10-24T17:50:45","modified_gmt":"2018-10-24T22:50:45","slug":"eight-reasons-a-financial-crisis-is-coming","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=39656","title":{"rendered":"Eight Reasons a Financial Crisis is Coming"},"content":{"rendered":"
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Eight Reasons a Financial Crisis is Coming<\/a><\/h3>\n<\/div>\n
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It’s been about 10 years since the last financial crisis. FocusEconomics wants to know if another one is due.<\/p>\n<\/section>\n<\/div>\n<\/header>\n
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The short answer is yes.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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In the last 10 years not a single fundamental economic flaw has been fixed in the US, Europe, Japan, or China.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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The Fed was behind the curve for years contributing to the bubble. Massive rounds of QE in the US, EU, and Japan created extreme equity and junk bond bubbles.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Trump’s tariffs are ill-founded as is Congressional spending wasted on war.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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Potential Catalysts<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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  1. Junk Bond Bubble Bursting<\/li>\n
  2. Equity Bubble Bursting<\/li>\n
  3. Italy<\/li>\n
  4. Tariffs<\/li>\n
  5. Brexit<\/li>\n
  6. Pensions<\/li>\n
  7. Housing<\/li>\n
  8. China<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n
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    Many will blame the Fed. The Fed is surely to blame, but it is prior bubble-blowing policy, not rate hikes now that are the problem.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    1. Junk Bonds<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    Many have labeled this an “everything bubble” which is not quite accurate. Yes, the Fed re-blew the housing bubble as well as an equity bubble. But the real standout is the bubble in junk bonds.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    Companies are borrowing money to buy back shares at absurd valuations.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    In the US, close to 15% of the companies in the S&P 500 only survive because they can roll over their debt. For discussion, please see Rise of the Zombie Corporations: Percentage Keeps Increasing, BIS Explains Why<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    I expect a junk bond crash and that will take equities lower with it.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    2. Equity Bubbles<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    Stock valuations are stretched almost beyond belief. The CAPE – Shiller PE was only surpassed by the DotCom bubble. The CAPE PE on October 3 when I last wrote about it was 33.49.\u200b<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    \u200bMeanwhile, Companies are Furiously Guide Earnings Estimates Lower<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    There will be few places to hide. GMO Forecasts US Equity Losses for 7 Years<\/a>.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

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    \u200bWe may not see a “crash” per se, but if not, then expect a slow bleed over many years, Japanese style.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n

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    \u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n","protected":false},"excerpt":{"rendered":"

    Eight Reasons a Financial Crisis is Coming It’s been about 10 years since the last financial crisis. FocusEconomics wants to know if another one is due. The short answer is yes. In the last 10 years not a single fundamental economic flaw has been fixed in the US, Europe, Japan, or China. The Fed was […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[312,8222,14648,13390,661,662],"class_list":["post-39656","post","type-post","status-publish","format-standard","hentry","category-economics","tag-financial-crisis","tag-great-financial-crisis","tag-michael-shedlock","tag-mishtalk","tag-qe","tag-quantitative-easing"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39656","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=39656"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39656\/revisions"}],"predecessor-version":[{"id":39657,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39656\/revisions\/39657"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=39656"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=39656"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=39656"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}